The ITO, Ward-4(1), Baroda V. M/s. New S-Chem SearchLtd. ( Laxmi Infra Stone Ltd.), Baroda

ITA 1044/AHD/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9697 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 23-12-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 10-04-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD . . , , BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.1044/AHD/2014 ( / ASSESSMENT YEAR : 2009-10) INCOME-TAX OFFICER, WARD 4(1), BARODA. / VS. M/S NEW S-CHEM SEARCH LTD. (LAXMI INFRA STONE LTD.) 3-A, UDAY PARK SOCIETY, B/H SHIV MAHAL PALACE, ALKAPURI, BARODA. ./ ./ PAN/GIR NO. : AAACN 6788 M ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI PRASOON KABRA, SR.D.R. / RESPONDENT BY : --NONE-- / DATE OF HEARING 23/12/2016 / DATE OF PRONOUNCEMENT 23/12/2016 / O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THIS APPEAL HAS BEEN FILED BY THE DEPARTMENT AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)- III, BARODA, DATED 31/01/2014 FOR THE ASSESSMENT YEAR (AY) 2009-10 AND FOLLOWING GROUND OF APPEAL HAS BEEN TAKEN: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS.84,79,235/- BEING REMISSION OF THE LIABILITY OF SUNDRY CREDITORS U/S 41(1) OF THE ACT WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO PRODUCE REQUIRED DETAILS AND TO SUBSTANTIATE THAT THE LIABILITY MENTIONED IN THE FINANCIAL STATEMENT SUBSISTS. ITA NO.1044/AHD/2014 ITO VS.NEW S-CHEM SEARCH LTD ASST.YEAR 2009-10 - 2 - 2. IN THIS CASE RESPONDENT WAS GIVEN NOTICE BUT NEITHER RESPONDENT NOR ITS REPRESENTATIVE APPEARED BEFORE US. 3. THE FACTS OF THE CASE THAT DURING THE PERIOD UNDER CONSIDERATION, THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF TRADING IN DIAMOND AND STARTED THE TRADING IN DIAMOND AND RELATED ITEMS IN THE CURRENT YEAR I.E. F.Y. 2008-09. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SHOWN GROSS RECEIPTS OF RS.39,26,47,037/- AND GROSS PROFIT OF RS.95,48,637/- DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO SUBMIT THE COPY OF BANK STATEMENT, COPY OF AUDITED ACCOUNTS FOR THE YEAR ENDING ON 31.03.2009 ALONG WITH ALL ITS ANNEXURES AND THE NOTES FORMING PART OF THE ACCOUNTS, COPY OF TAX AUDIT REPORT ALONG WITH ITS ANNEXURES, COPY OF DIRECTIONS REPORT ETC. THE ASSESSEE HAS SUBMITTED THE DETAILS CALLED FOR AND THE SAME HAS BEEN VERIFIED AND KEPT ON RECORD. 4. ON VERIFICATION OF CURRENT LIABILITIES AND PROVISIONS, IT WAS NOTICED THAT ASSESSEE SHOWN SUNDRY CREDITORS FOR OTHER THAN SSI CREDITORS OF RS.1,78,08,172/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE COMPANY WAS ASKED TO PROVIDE DETAILS OF NAME, ADDRESSES AND PAN OF THE CREDITORS OF RS.1,78,08,182/- THE ASSESSEE COMPANY WAS ALSO ASKED TO PROVIDE THE REASON FOR THE AMOUNT OUTSTANDING AND THE PERIOD SINCE WHEN THE SAME IS PAYABLE BY THE COMPANY. 5. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE COMPANY ONLY PROVIDED NAME AND AMOUNT OF THE CREDITORS. THE ASSESSEE HAS ALSO PROVIDED THE EXPLANATION ONLY IN FEW OF THE CASES IN WHICH THE CREDITORS ITA NO.1044/AHD/2014 ITO VS.NEW S-CHEM SEARCH LTD ASST.YEAR 2009-10 - 3 - HAVE FILED THE LEGAL SUIT AGAINST THE COMPANY TO RECOVER THEIR AMOUNT. BUT THE ASSESSEE FAILED TO PROVIDE REASON FOR THE NON-PAYMENT OF AMOUNT TO THOSE FOUR PARTIES. THE AMOUNT DUE TO THESE FOUR PARTIES IS RS.93,28,947/- 6. THE ASSESSEE COMPANY WAS FAILED TO PROVIDE ADDRESS AND PAN OF THE OTHER CREDITORS AMOUNTING TO RS.84,79,235/-. THE ASSESSEE COMPANY WAS ALSO FAILED TO PROVIDE REASON FOR THE OUTSTANDING AMOUNT AND CURRENT STATUS AND ALSO COULD NOT PROVIDE DETAIL IN WHICH THE LIABILITY WAS ARISEN. 7. ON VERIFICATION OF THE RECORDS, IT IS OBSERVED THAT IN THE F.Y. 2008- 09, THE COMPANY HAD CHANGED THE BUSINESS ACTIVITY TO TRADING OF DIAMONDS. THERE WAS NO OTHER BUSINESS ACTIVITY WHICH WAS CONDUCTED DURING THE PERIOD. THEREFORE IT IS CLEAR THAT THE LIABILITIES OUTSTANDING IN THE BOOKS OF ACCOUNTS DO NOT SUBSIST IN THE YEAR UNDER CONSIDERATION. THE INFORMATION SUBMITTED BY THE ASSESSEE COMPANY ALSO REVEALS THAT OUT OF TOTAL OUTSTANDING LIABILITIES OF RS.1,78,08,182/- THE CREDITORS OF RS.93,28,947/- ONLY HAVE FILED THE SUIT FOR RECOVERY OF THE AMOUNT. FURTHER, THE ASSESSEE COMPANY WAS FAILED TO PRODUCE REQUIRED DETAILS AND TO SUBSTANTIATE THAT THE LIABILITY MENTIONED IN THE FINANCIAL STATEMENT SUBSIST. 8. BASED ON THE FACTS OBSERVED FROM THE RECORDS AND FURTHER SUBMISSION OF THE ASSESSEE, THE AMOUNT OF RS.84,79,235/- TREATED AS REMISSION OF THE LIABILITY UNDER SECTION 41(1) OF THE ACT. THE TOTAL INCOME OF THE ASSESSEE IS COMPUTED AS UNDER:- ITA NO.1044/AHD/2014 ITO VS.NEW S-CHEM SEARCH LTD ASST.YEAR 2009-10 - 4 - INCOME FROM BUSINESS OR PROFESSION AS PER COMPUTATION RS. 95,48,237/- ADD: DISALLOWANCE U/S.41(1) OF THE ACT AS DISCUSSED ABOVE RS. 84,79,235/- TOTAL INCOME RS. 1,80,27,472/- LESS: SET OFF OF BUSINESS LOSS OF A.Y. 2002-03 58,66,790 A.Y. 2003-04 36,58,222 A.Y.2005-06 85,02,460 RS. 1,80,27,472 /- TOTAL INCOME RS. NIL 9. BUSINESS LOSS OF RS.24,40,644/- FOR A.Y. 2005-06, RS.2,04,68,116/- FOR A.Y. 2006-07 AND RS.60,54,538/- FOR A.Y.2007-08 IS ALLOWED TO BE CARRIED FORWARD IN SUBSEQUENT YEARS. 10. AGAINST THE A.O. ORDER ASSESSEE PREFERRED FIRST STATUTORY APPEAL BEFORE THE LD.CIT(A) WHO ALLOWED THE APPEAL WITH THE FOLLOWING DIRECTION THAT WHEN THE FACTS OF THE PRESENT CASE WAS ANALYZED IN THE LIGHT OF THESE DECISIONS, IT IS SEEN THAT THE LIABILITIES ARE BEING ACKNOWLEDGED IN THE BALANCE SHEET AND THE AO HAS NOT BROUGHT ANYTHING ON RECORD TO SHOW THAT THE APPELLANT HAS OBTAINED ANY BENEFIT, WHETHER IN CASH OF IN ANY OTHER MANNER WHATSOEVER REGARDING THESE LIABILITIES. HENCE THE PROVISIONS OF THE SECTION 41(1) WERE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. HENCE THE ADDITION MADE BY THE AO WERE DIRECTED TO BE DELETED BY THE LD.CIT(A). 11. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGNED ORDER AND LD.D.R. PRASOON KABRA HAS FILED CERTAIN JUDGMENTS AND ONE OF THE JUDGMENT IS ASHT LAXMI DIAMOND & JEWELLERY V. ITO [2015] 59 TAMANN.COM 430 (MUMBAI TRIB.) IN THIS CASE REMISSION OR CESSATION OR TRADING LIABILITY A.Y. 2007-08, ASSESSING OFFICER ASKED ASSESSEE TO FURNISH DETAILS AND CONFIRMATION OF ALL SUNDRY CREDITORS SHOWN IN BALANCE ITA NO.1044/AHD/2014 ITO VS.NEW S-CHEM SEARCH LTD ASST.YEAR 2009-10 - 5 - SHEET ASSESSEE COULD NOT SUBMIT CONFIRMATION OF TWO CREDITORS AND IT WAS FOUND THAT IN LAST SO MANY YEARS THOSE PARTIES HAD NEVER SEEN BY ANYBODY. MOREOVER THERE WAS NEVER ANY DEMAND FROM ASSESSEE FOR LAST MORE THAN 10 YEARS AND THAT NO INCOME-TAX RETURNS HAVE BEEN FILED BY THEM AND IN THIS CASE U/S.41(1) WAS DECIDED IN FAVOUR OF THE REVENUE. 12. IN OUR CONSIDERED OPINION, THE ASSESSEE OUGHT TO HAVE GIVEN EACH AND EVERY DETAIL BEFORE THE AO WITH REGARD TO SUNDRY CREDITORS WHICH HAS BEEN FAILED TO DO SO AND SAME IS AMOUNT TO VIOLATION OF INCOME-TAX PROVISION. FOLLOWING OUR MUMBAI BENCH ORDER, WE ALLOW THE APPEAL OF THE DEPARTMENT 13. IN THE RESULT, APPEAL OF THE DEPARTMENT IS ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 23/12/2016 SD/- SD/- . . ( ) ( ) ( N.K. BILLAIYA ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 23/12 /2016 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-III, BARODA 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, //TRUE CO / (DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD TRUE COPY